Question

Short Answer

In examining an agency relationship, list factors that determine whether an employer/employee or independent contractor relationship exists.

I think I finally figured this one out. It's in a chapter of foundations of the legal environment and I believe it is talking about partnerships, the legal complications between business and independent contractors. This book is sometimes hard to understand.  Thank you for taking a look.

Answer 1

An agency relationship is a fiduciary relationship, where one party being the “principal” that allows an agent to act on behalf of the principal. The principal’s control will stand as holding on the agent and the agent must act in accordance.

The following are some of the responsibilities of an agent to a principal :

1. General Duty of loyalty
2. Act in accordance to the agency contract (express or implied)
3. Discharging duties with Care and Diligence.
4. Good conduct on behalf of the Principal
5. Act in accordance to instructions of the Principal (within legality)

Hence as per the definitions: in an employee - employer relationship the employee is an agent of the employer.

The above can be contrasted with an Independant Contractor:

In the case of contractor contractee a lot of the above implied duties in the case of agency do not stay.

Independent contractors are known to have a wide amount of discretion whereby they make decisions that are outside the control or knowledge of the Principal.

The business owner / Principal engages and expects the contractor to discharge his duties to the best of his duties, and hence, he may take calls that are independant of the principal, and sometimes need not need express permission from the principal as in the case of a pure agent - principal relationship.